Question

A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company bases its variable manufacturing overhead standards on direct labor-hours. Standard hours per unit of output 3.80 DLHs Standard variable overhead rate $ 11.15 per DLH The following data pertain to operations for the last month: Actual direct labor-hours 8,700 DLHs Actual total variable manufacturing overhead cost $ 95,840 Actual output 2,100 units.
What is the variable overhead rate variance for the month?

a.) 1446F
b.) 1446U
c.) 1165F
d.) 1165U

Answer 1

Answer:

c.) 1165F

Explanation:

The computation of the variable overhead rate variance is shown below:

= (Actual total variable manufacturing overhead cost) - (Actual direct labor-hours × Standard variable overhead rate)

= $95,840 - (8,700 direct labor hours × $11.15 per DLH)

= $95,840 - $97,005

= $1,165 favorable

Simply we multiply the actual direct labor hours with the standard variable overhead rate and then subtract with the actual variable manufacturing overhead cost

All other information which is given is not relevant. Hence, ignored it